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Can saving too much ruin your retirement?

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  • Can saving too much ruin your retirement?

    I like Chuck Jaffe's laid-back, non-emotional, common sense writing. This article with comments by Michael Kitces, makes some excellent points about the practicality of planning for post-career. The concepts Michael explains mirror the projections that we frequently see when planning with clients - that they will continue to grow their assets during retirement rather than spending down what they have worked so hard to enjoy.
    Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

  • #2
    Ruin? Really? No I don't think so.
    It brings up several issues though that are good food for thought. For one thing the article implies there is a linear correlation between annual spending and annual fun when that is not the case. There is plenty of literature out there looking at the factors contributing to subjective well being and spending is a minimal part of that.
    Second there are ways to hedge against the longevity risk (longevity insurance or SPIA).
    Third there is a big asymmetry between the "harm" of having too much money vs the actual harm of being destitute in your old age.
    Fourth there is a certain life enhancing energy that comes with frugality. This is subjective and value based. Maybe I read too much Ben Franklin but I'm suspicious of anything that discourages Industry or Frugality.
    Thanks for posting the link to the article.

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    • #3
      I think the mindset of accumulating to deaccumulating is very hard.  I have recently read that the average Ira holder at vanguard who is 70.5 or above reinvests their Rmd money in a taxable account.

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      • #4




        I think the mindset of accumulating to deaccumulating is very hard.  I have recently read that the average Ira holder at vanguard who is 70.5 or above reinvests their Rmd money in a taxable account.
        Click to expand...


        That has been our experience for at least 75% of retired clients. It's not so much that they are afraid to spend, but that their priorities spending patterns have changed so much by retirement that they really have no special use for the money. They are not unhappy or feeling as if they would be "ruined" by spending more; instead, they tend to live a simpler lifestyle and have no debt.

        I see many comments that doctors plan to be in the 15% bracket during retirement. I think that is unrealistic, at least under today's tax structure, unless they find opportunities to do some serious Roth conversions while they are still fairly young. Take a look at the RMD tables. A $3M IRA gives you an RMD of over $113k, and that's not counting Social Security and income from taxable accounts. I think it is a mistake to wait until retirement when you hope to be in lower brackets to begin converting. Am planning a post on this topic soon.
        Working to protect good doctors from bad advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Well said

          Too much Roth and tax free and low bracket mentality with the colleagues I work with and what I see on this board

          How dumb. You won't be in low tax bracket (lower sure, but not low).

          Personally I live life now, not in retirement. This seeps into the way I invest as well (cash flow vs growth)

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          • #6
            I have been thinking about this for a long time.  On the brexit panic I did my first conversion and I found it to be easy. I am 59 so I will gradually convert what I can to keep those rmds reasonable.  I am not counting on any specific tax bracket. Most of my money is in a taxable account.

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            • #7
              On one hand, more people will suffer from having too little resources in retirement than from having too much. And the downside if you have too much? Your heirs will get more.

              On the other hand, you only get one life to live, and you might as well live it to the fullest. If we knew exactly how our life was going to play out, we could do a better job of planning for the future. The fact is we don't, and we can't.

               

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              • #8
                True but it is mostly a mental state. If you are confident in your abilities, then not matter the economic situation, you can go out there, create value and make money. However, you get one shot at life.

                Most of the fear for doctors stems from time invested to gain this skill and if situation changes, lack of other marketable skills. And rightly so, no arguments there.

                Personally I think there should be equal emphasis on adaptability as there is on retirement portfolio.

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                • #9




                  True but it is mostly a mental state. If you are confident in your abilities, then not matter the economic situation, you can go out there, create value and make money. However, you get one shot at life.

                  Most of the fear for doctors stems from time invested to gain this skill and if situation changes, lack of other marketable skills. And rightly so, no arguments there.

                  Personally I think there should be equal emphasis on adaptability as there is on retirement portfolio.
                  Click to expand...


                  I agree with all of the above. Both the financial services industry and our masters (the government, hospital CEOs, insurance cos, etc.) lord over physicians by making us think that without their guidance and oversight, we are incompetent buffoons. While for a few this might be the case, most of us are inherently hardworking, creative, and capable with the ability to succeed and thrive in any of a number of professional settings.

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